Monday, 26 January 2015

I just bought a house for 800k, My 7 easy home buying tips!

I have purchased numerous homes now in my life, more than ten in total. Here are my home buying tips and my latest deal details.

 My 7 Home Buying Tips

1. Secure Financing, Shop Around!

 Shop around! Don't just go into the bank you are currently banking with and call it a day. Get people to compete for your business. Go to multiple banks, credit unions and mortgage brokers to shop for rates. Don't be afraid to ask for a better rate. Get lenders to compete with each other. Show them your current lending offers.  Whats the worst thing that's gonna happen, they say NO? Who cares! Move on to the next person. Makes sure you do this within a two week span so it doesn't affect your credit score too much. Multiple inquires of your credit will only count as one credit pull if you do it within a short period of time pending where you are from.



2. Find and Interview Real Estate Agents!

 I have been visiting vast amount of open houses this past year and kind of interviewing the realtors in the process. See if you vibe with their business style. See if they understand the market. Ask them questions you already know the answer too to gauge their responses. I knew two agents personally but I did not like how they do business and they were not a good fit. So even though I got along with them I did not trust their real estate knowledge and judgement. I want a killer on my side. Someone that will fight for me and do as I say. You don't want a yes man and someone just looking after their own interests.


3. See The Entire Market!

Volume is key. See as much as you can. Cast a wide net.  Don't rely on the realtor to pick the listings. Get on his alert systems for their MLS. Even though my budget was 800k and only consisted of 3 local areas I cast my net from 600k-950k in about 7 areas. Reason so is the more I see , the more I can compare. Also see whats available above your range. You never know as there are often price drops or the higher priced properties can be negotiated into your price level. Also keep an eye on past listings sale prices, this will further guide you on current market levels and comparable listings. After a while of looking you will get a feel of prices and value. You wont get this information by just lurking on your computer. You have to hit the pavement and look for yourself. You cant gauge build quality, neigbors, shortfalls and neighborhood by pictures online.


4. Make The Lowball Offer!

Business is business! Don't make a emotional decision. Stick to your plan. After finding a few places you like its time to dig deeper. I often give a place a look 3-5 times before I decide to make an offer. Also inspect the neighborhood and at different times of day and night. Don't worry about inconveniencing your realtor. That is their job, make them work for their commission.

Fair market value for homes often differ from their asking price. That is why it is very important to gauge the markets past sales and current inventory for comparables. Often new listings are wrongly priced. At times new listing are under priced and are snatched up within days. Other times over priced listings will sit for a months without an offer and they then resort to price drops back down to fair market value.

Always start low and put it in writing. It shows you are serious if its in writing. Sellers that have a place listed for a couple months with no offers will welcome any offer. You never know what peoples circumstances are. Estate sales, divorce sales, job relocation are all great times to make a buy especially when sellers are desperate to get their money out. Make your offer attractive by keeping it clean and not too many stipulations especially financing.


5. Negotiate Hard!

It is your money, so don't let your realtor dictate how negotiations will go. Yes feelings will be hurt by realtors and sellers but this is business. I always start with a low ball offer in writing to gauge the seller. This is where your realtor has to do some work. Their job is too gauge how motivated the seller is and their bottom price. Play it cool. Let time pass. If you don't like their counter I often will put a low ball at 2-3 other places to gauge them out. Be firm with your offers and ready to walk. Don't sway from your initial plan and don't let your realtor take you up more than you are willing to pay. Remember this : In Real Estate you make your money from your purchase and not your sale. So don't overpay for a house and don't become emotionally attached to it. Be ready to walk away from a deal if its not want you want price wise. Its amazing how many times I have walked away from a deal and then the next day or two the sellers realtor will call back caving into my price demands.


6. The Inspection

Very important part in buying a new home which often gets overlooked. Whatever you do , DO NOT use a home inspector your realtor recommends. Realtors will often recommend home inspectors that are just YES men that wont jeopardize the deal. You cheat yourself out of a solid home inspection that way. My advice is to use an independent home inspector. Often called deal breakers because in essence they give you the real unbiased outlook of the home you are buying. You do not want them rushing through the house. So negotiate the amount of time ( 5 hour minimum for a home 2500 sqft plus) and the price days before the inspection. On the day make sure before they start on how long they will be there and areas of concern inspected. I recommend being there the entire time the home is being inspected itself. Make sure they bring their ladder as the roof and attic must be inspected. A good home inspector will give you a detailed report with pics of all areas of concern and a checklist of all good areas. I have walked away from several deals in the past when the home inspection turned out areas of concern. If the inspection turns up some red flags you have another bargaining chip in negotiations. You can try and get the sellers to fix the issues or offer even less money to get the work done yourself.


 7. The Close and Possession

Once you are satisfied with the inspection and no major issues arise it is time to remove subjects. If issues arise then you can try and further negotiate your buying price lower. Make sure everything in the contract is fulfilled. If you like a certain mirror , shelf , audio system ,wine rack make sure it is included in the deal! Also put a professional cleaning clause in the contract as often people will leave their place a mess upon leaving.




The details of my deal.

1. Secure financing

I was given an early inheritance to put toward a rental property with certain parameters. It had to be close by to me, within 20 years old, well built and something that could fetch solid rental income. It was an all cash deal so I did not need any financing.

2. Find a Real Estate Agent

 For a few months I have been going to all the open houses until I clicked with a realtor. Told him  my house criteria and my plan of seeing as much as I can and coming hard with offers. He said he was up for the challenge.


3. See the Market.

We hunted for 2 months and often seeing 4-5 homes a day mon to fri. Seen maybe 50-60 houses total before I narrowed it down to about 5 houses after seeing them 2-3 times each.


4. Make the Offer

After narrowing it down to 5 houses I took third and fourth visits at the 5 places. There was 2 houses I was quite keen on. I walked around the neighborhoods at different times in the night and timed my drives to various places.I was ready to put in the offer. I put an offer of 780k at my top place who were asking for 830k.

 5. Negotiations

Place 1
They held firm and came back at 825k. In my opinion the place was overlooked and well built and I had a true value of about 860k. I had no doubt the place that has been sitting for a month would sell for minimum in the spring for the 830k. I told them we are to far apart and I didn't even counter offer. The sellers played it off like they were about to expect another offer soon. I wanted to make them sweat. I then started looking at place number 2

Place 2
My realtor extracted information from the sellers realtor that they were motivated sellers due to a divorce. Christmas was rapidly approaching and winter time is notoriously slow in western Canada. So I kept my cool. I then put an offer on place number 2 which was a bit cheaper but further out of town. They were asking 799k and I came in at 710k. Place has been sitting for 3 months and was overpriced but it was a good home. It was also due for a price drop. I estimated the place was worth about 740k. They came back at 780k and I didn't counter offer. I left it like I did the first place.

Back to Place 1
After 10 days we are just before Xmas. Time to go back to the well. Turns out the sellers realtor has been frantic. He was trying to muster an offer from everyone that ever visited the house. We told them we are coming back a bit higher but firm. I put in mind my bottom price as 800k which I kept private from even my own realtor. I put in an offer at 790k cash deal close in a month. Sellers came back at 810k. I returned at 795k firm and final lol. They came back at 805k and said that was their final.

Lol almost there just 10k apart. They were not budging and I I didn't plan on coming back at 805k. I was ready to walk away. Told my realtor I am ready to walk away from it. He was disappointed that we came so close and he tried to get me up to the 805k. I told him quit being so emotional and nervous to get the deal done. I told him maybe if these guys meet halfway at 800K (my top price) I would consider it. He then called me 10 minutes later and told me its a no go. I said ok lets go back after place number 2 again and see how close we can get after the weekend passes.

Monday Morning my realtor calls. They caved! Place 1 for 800k is a deal but I have to remove subjects and close fast. I take the deal!  But just not yet until I review the offer and I add a couple of minor things in the contract like the extra fridge in the garage, Book shelf and a couple mirrors. LOL the sellers are livid with me. They say I am grinding them too hard. Why yes I am! This is business and my name is Asset Grinder!


6. The Inspection

So i only had a few days to remove subjects as Xmas is literally a few days away. I brought a deal breaker inspector I use that is from Vancouver which costs me $150 extra transportation for a total of $550 for a 6 hour inspection. We checked the place top to bottom and only very minor issues came up. Total repair costs $900. I tried to get that amount taken out of the contract but the sellers wouldn't budge. I told my realtor this is a problem. My realtor lets out a deep sigh and looks me dead in the eye and said "I will fucken pay it, lets get this place over with! I guess I owe him lunch. Maybe Denny's for his birthday! LOL.




7. The Close and Possession

I used a lawyer I know to deal with all the closing paperwork which cost about $900 which is the going rate. Got the keys yesterday and did a walk through with my realtor. everything was great except the seller forgot to leave one of the mirrors that were in the deal. My realtor let the other realtor know and within a hour the seller came by to drop it off. I congratulated him on the sold house and thanks for the deal. He didn't shake my extended hand and shoved the mirror in my hand and left grumbling.

So there you have it. Now its time to find a renter! As you can see I am not that fun to deal with but oh well its my money. I don't care about the sellers feelings or even my realtors because its his job.

My New Home Details 
5 min to downtown
Built in 2011
Arts and Crafts style 3 level semi custom home
3000 sqft home
5000 sqft lot

I have estimated future monthly rent to be between $3400-$3600 for a cap rate between 4.6 to 4.9% which is not bad. I think the place will have some decent capital appreciation and even more potential if I put 10-15k into the place to make a separate suite in the basement. It would fetch 880k easy if I were to do that. For now I will rent the place for a few years and see how the market goes. If anything it will be a solid income rental for years to come.





So what you guys think of the tips and my deal????


49 comments:

  1. Great tips on the purchase and negotiations.
    Your cap rate calculation seems a bit high if you account for any vacancy and maintenance.
    Beautiful looking place for sure.

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    1. Yes I did not account for vacancy and repairs which will always hurt your return. Too combat this I will be looking for long term renter that will be required to sign a 2 year minimum term. Also on the repair side the house is in basically new condition so I do not anticipate anything going wrong but that doesn't stop surprises from coming up obviously.
      Thanks for stoppin by!

      Delete
  2. Beautiful looking home no doubt, and the 7-steps are well put together. The most important takeaway for people is not to be afraid to walk away. Emotions will ruin any investment, real estate or otherwise. Separating the two is difficult, but such a valued skill set.

    Thanks for sharing your experience. As an all-cash deal, you'll have added a nice chunk of change to your annual passive income.

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    1. Spot on. Be ready to walk from any deal if its not right. Something else always turns up. People often put all their eggs in one basket and get crushed when things fall through. You gotta stay on your toes and stay hungry.

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  3. Haha,
    love your negotiation tactic a lot. Good old school not the new age "at the end of the day both need to be happy" deal. Thanks for the reading and yes, I like the picture of the living room a lot.

    keep on grinding

    lars

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    1. Thanks for droppin by Lars. This day and age the only person you can trust is yourself. Everyone wants to take advantage of the consumer i some way and its not right. You should see me flip out when someone tries to sell me an extended warranty lol.

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    2. You don't have to be a sucker, but there's no need to be an asshole either.

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    3. You are right but business tactics are becoming more unethical as times pass. take for example this past Xmas when my mom bought toys for my kids and she got duped into buying extended warranties for the toys by high pressure tactics. I am up front with all my dealings and if people dont like it they can walk themselves.

      Delete
  4. Congrats on adding more ammo to your income stream, A-G. Also, cant argue with any of those tips mentioned above.

    Best wishes
    R2R

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    1. Thanks buddy. Trying to reach a solid 10k a month in passive income at some point. Till I do I am gonna keep grinding.

      My wifey upset we haven't taken any vacations for a few years. I told her maybe next year cause we are trying to get ahead. She gets jealous as she sees all these vacation pics on her facebook. Then I tell her thats why all these people are broke all the time and live paycheck to paycheck. Sacrifice baby!

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  5. Keep up the great work Asset-Grinder.
    You truly are a hustler bud. I hope to be well off like yourself by the time I'm 40. I got 8 years to grind it out and save as much as I can.
    Thank you for sharing.
    DividendHustler.com is my website i started to document my journey.
    Im gonna do it up too.

    Good luck to us.

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    1. Thanks for droppin by Tyler. I will put your site on my blogroll and try and help get the word out. Love the website name. Its so Vancouver.

      Reading your bio I wouldnt be surprised if havent crossed paths in Vancouver at some point. Especially in the poker room lol.

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  6. Great tips. We did something similar with our house purchase as well. We ended up using a home inspector that our realtor recommended but the guy did a very good job and found a bunch issues that had to get repairs. Next time I might consider getting an independent inspector.

    Looks like a gorgeous home, congrats! I'm sure you and your family will enjoy living in there very much. When are you inviting us bloggers over for a party? :D

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    1. Im gonna be using it as a rental for now but I might have some other things planned for it. Early in my years I bought a home with a realtor reccoed home inspector. He was just a scam and was in and out within 2 hours and missed huge areas of concern. A lesson I surely learned from. Burn me once shame on you (but I will get revenge), burn me twice shame on me lol. I posted up several bad reviews about that home inspector and periodically will give him another bad ones years after the fact lol.

      Delete
  7. I am doing the exact same thing here in NY, and those tips are tips to live by. I just started looking for another place to buy, so this was a great reminder to never settle for anything less than what I want. Good stuff...

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    1. Thats right never surrender or settle. All the way up to possession !

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  8. Nothing beat cash offer. You would want too work with a real estate investor that willing to take a little cut from his $24k commission to get the deal to go through. There are some bad ones that would give in $1k so he can get the $23k.
    These are very good advices. When I was buying my 4-plex, I wouldn't let my realtor know that I had set my heart on it. I kept making lowball offers regularly on the properties that I was interested in. Always have an attitude it's not the only one out there. If he wants to earn his commission, he has to work for it, just how I worked for the cash to buy it.

    Monthly cash low of $3600 is like somebody's monthly salary. I hope to get another 4-plex, then I'll be set.

    Goodluck with the rental business, and please keep on sharing your success stories to keep us motivated.

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    1. Thanks for dropping by. I was originally looking at triplex and fourplexes but they were a bit pricier but unfortunately I wasnt allowed that option.

      I dont mind a realtor earning their full commission on the buy as I make them work for it. When it comes time to selling I will negotiate a lower commission and a clause for even further reduced commission if they double end the deal. I will aim for about just about half the commission and shop for a good realtor willing to take the deal. One will always take it if they are hungry enough.

      Delete
  9. Asset-Grinder,

    Congrats on the house. Nice negotiating and showing people how to get it. If people let their emotions take over, they end up paying a lot more for the house.

    Aside, my step father was a realtor and just retired from it. Back on the east cost, he was the realtor for a buyer. The buyer put in an offer and he told them that is way to much money for that house. Buyer tells him, "I make good money out west". My stepfather says to him, if you lose your job and unable to find a job for a while, then you will have to sell the house and will not be able to get near what you paid for it. Buyer didn't listen and bought the house. We all know what is going on in Alberta now with fallen oil prices.

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    1. Great lil story of an emotional investor. Fact is we all make mistakes. Even me, lots of em . We just try to learn from them and other peoples stories as well.

      I quite enjoyed the whole process of hunting and making a deal. Who knows maybe I will get a realtors licensee on the side and do it part time to fill the days hours.

      Delete
  10. Asset Grinder,

    I love reading your posts so I can see how someone with a high net worth goes about investing. This post was very educational for me because I do plan on investing in real estate someday and have no experience in the negotiation process. It's awesome to see the insight from someone in today's market with actual numbers and examples.

    Thanks for sharing! If you have some time, check out my blog at free2retire30.weebly.com! I'd really appreciate it!

    F2R30

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    1. Thanks for droppin by, will be checking your site out for sure. You are such a young buck starting out and will add you to my blogroll> I will be watching your numbers, You are on the right track.

      Delete
  11. IT seems like an excellent deal, I don't know how are taxes in your area as that could hurt profit. 50K lowball offer was really low, and something easier to consider on higher priced properties as this one is. The realtor offered to pay for the 900 bucks because they will make thousands on your deal, so I would have done that also if I were to make 20K on a deal. I think your net worth will be increasing soon with this deal.

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    1. It was a good deal considering potential rental income. I can go upmarket with this home and attract lawyers,doctors and other professional families. My market is really lacking in nicer homes for rent. I already accounted for insurance and property tax in my 4.6-4.9% cap rate. I did not account for repairs tho but I really dont anticipate any on this newer home for the next few years. My realtor is only making half the commission, about 7k all said and done. Yes next net worth update will be a biggie.

      Delete
  12. Great tips and I happen to agree with you that it is your hard earned money "so don't let your realtor dictate how negotiations will go." Too often we forget that realtors are just salespeople looking to make their commish and most, if not all, truly do not have your best interest in mind. They just need the sale. Sure, lowball, stick to your plan and don't get swayed. Awesome looking house. Love that living room photo with all those windows. Thanks for sharing.

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    1. You hit the nail on the head. They are salesmen and all they care really about is the commission.They are no different than a car salesman. I respect their professions but at the end of the day they want to sell you a product. Even though I am a tough customer I will keep things light and fun with jokes and candid conversation. Plus I am fair, I wont snake anyone out of a deal to get one over on them.

      Delete
  13. Wow, gorgeous home!

    Did I read that right? "Trying to reach a solid 10k a month in passive income at some point."

    Wow, that would be good (understatement of the year).

    I hope to reach $12k per YEAR this year :)

    Mark

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    1. LOl yes 10k ! Honestly thats still not enough really without a day job. At 20ka month I would be happy. I am always crunching numbers in my head, like how long can I last spending xxxxx dollars a year, or how much per day I am making.

      I am scared to run out of money one day so I over analyze every dollar I spend. Then I adjust my plan accordingly as time passes. I haven't had a vacation in 3 years and I keep telling my wife we cant afford it. Its not sitting well with her lol.

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    2. I don't think you'll run out of money, making $10k per month in passive income. Without any debt, you are set for life.

      Mark

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    3. 10k for my whole household is not a lot. Middle class this day and age. If I had no wife and kids its a different story!

      I guess you always try and achieve the next rung on the ladder!

      Delete
  14. What an excellent article with your unbiased but at the same time honest personalized tips. I will have to learn and master to take great care of my money, my beloved soldier. Patience, patience and patience when it comes to negotiation.

    Thanks for the great article.

    BeSmartRich

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    1. Thanks for the kind words and dropping by buddy. This day and age nobody has any patience.

      Delete
  15. Holy hell, that's an epic house! Well done, AG, well done! :)

    Great story too. I'm glad I'll probably never have to barter with you because you sound like the worst client ever. Love the tips though. I've saved them so I can use them to my advantage if I ever decide to buy a place for myself.

    Enjoy the rental checks, buddy, you've earned it.

    Best wishes,
    NMW

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    1. I could of gone behind of realtors back and made a private deal with the owner, now that would be the worst client ever lol.I could have asked for a commission kickback which I didn't do. Honest work and honest pay. Many realtors will take advantage of the client and push places on them and use high pressure tactics. My guy was pretty calm throughout, I just made him work for it. Nothing wrong with that.

      Delete
  16. Asset-Grinder,

    I couldn't agree more with using an independent home inspector. This summer we had an accepted offer on a house and refused to use the home inspector my realtor recommended. "She did not take this news well". The house we had an accepted offer on was purchased a year ago and they were relocating for work. The home inspector I used found mice activity in the attic which appeared to be present for quite some time. Looking at their home inspection that was completed by the home inspector the realtor recommended said he did not inspect the attic because of difficult access but said there is no reasons to be concerned.

    Needless to say we walked away from the house and ended up buying the house we live in now privately. When I sell my next house I will be doing it without the help of a realtor.

    Thanks for sharing,

    Mr. Captain Cash

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    1. If an inspector does not check the attics, roof or crawl space then they should be ashamed of themselves. Glad you had the common sense to use your own as very few people do.

      Thanks for dropping by.

      Delete
  17. Congrats on the purchase and nice tips for home buying.

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  18. Looks like a nice place to me! I really like those windows in the living room. Getting the basement rent-able would be good as well, although you might then have to deal with issues between your tenants if they dont quite get along. But, good interviewing will help to prevent that! Would you be advertising the garage as a shared space then? One car per tenant? or the main floor people get both? I guess it depends on availability of street parking/local transit.

    Nice negotiating, you got your realtor to pay for part of the house! :P

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    1. Right now I have the entire house rented to one family of 5. A stay at home mom, A real estate broker, Their two kids 2 and 6, and a retired dad. They signed a two year lease. I am gonna put a suite in the basement sometime this year and I may relist it in a year from now pending on the market. I think I can get a good pop on the property next spring as their is some new houses coming up in the neighborhood increasing everyones value.

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  19. I love the haggling part of the deal. It takes guts, and not everybody likes it. I for some reason love it, and quite enjoy it.

    Nicely done :)

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    1. Yes negotiating is not for most people but its one of my strengths. people usually bring me with them when they need advice on a home or buying a car. All I get is a lousy steak dinner out of it lol.

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  20. Well done on the negotiating, sounds like you got a good deal

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    1. I hope so! We willl see when it comes time to sell. You never know!

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  21. This comment has been removed by a blog administrator.

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  22. Hm ,.. Yes the best way is to just play like my friend Williams Bud-nick he just play games and enjoy his life.
    Boerne Texas Real Estate

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  23. Thanks for sharing your experience.Beautiful looking home no doubt, and the 7-steps are well put together. The most important takeaway for people is not to be afraid to walk away. Emotions will ruin any investment, real estate or otherwise. Separating the two is difficult, but such a valued skill set. Low commission property sales

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  24. Good home buying tips! Thanks for sharing your experience.

    Augustus from Bonifacio Global City

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